> For the complete documentation index, see [llms.txt](https://usdu.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://usdu.gitbook.io/docs/introduction/core-design-principles.md).

# Core Design Principles

$USDu was created with a clear mission: to serve as a reliable, yield-backed stablecoin and liquidity layer for the next generation of DeFi applications. Its design prioritizes long-term sustainability, capital efficiency, and integration flexibility. The following principles guide every aspect of the protocol:

* **Protocol-minted supply**\
  Only the protocol can mint $USDu, always against yield-bearing collateral in credit-rated lending markets. There is no user-based minting.
* **Yield-collateralized value**\
  Every $USDu is backed by productive on-chain assets generating verifiable lending income. The stablecoin’s value is derived from this real yield.
* **Immutable core, modular extensions**\
  The core design of $USDu is immutable, giving users and integrators strong guarantees of system integrity. Flexibility comes through a modular architecture governed by Curators and protected by Guardians.
* **No reliance on user-provided liquidity**\
  Redemptions and system operations do not depend on external liquidity pools. Protocol-owned liquidity and capital efficiency ensure smooth functioning.
* **Risk-adjusted credit structuring**\
  Vaults and collateral assets are classified into transparent credit risk classes, with controlled LTV and yield parameters.
* **Sustainable and transparent yield obligations**\
  $USDu uses a dynamic floating APY model that matches yield obligations to actual lending performance, preventing under- or over-payments.
* **Capital efficiency with looping support**\
  The system supports safe recursive lending and borrowing, unlocking powerful trading and yield strategies while maintaining systemic safeguards.

$USDu is built to serve as a resilient foundation for DeFi ecosystems, enabling both protocols and users to confidently scale liquidity and yield strategies.